Job Displacement Rate Hits New Record

Displacement rates in the period from 2001-2003 exceed the peaks of the prior two recessions.

The Labor Department's survey of displaced workers shows that job loss among long-tenured workers (more than 3 years with the same employer) hit a new high in the three years from 2001 through 2003.

The displacement rate of 6.3 percent is only slightly higher than the 6.2 percent displacement rates registered through the prior two recessions, but the figure is nonetheless striking given the apparent mildness of the most recent downturn. While the unemployment rate reached 10.8 percent in the 1981-82 recession and 7.8 percent following the 1990-91 recession, it never exceeded 6.3 percent in the most recent downturn. This provides further evidence that the unemployment rate is not a good measure of the severity of the recent downturn.

Displaced workers fared especially poorly during this period in finding new jobs. At the time of the survey in January of 2004, 20.2 percent of the workers displaced over the last three years were still unemployed and 15.0 percent had given up looking for work altogether. Another 14.1 percent had to take pay cuts of at least 20 percent (before adjusting for inflation) in their new jobs. Only 16.2 percent of displaced workers managed to find full-time jobs that paid at least as well as the jobs they lost. By comparison, 23.5 percent of the displaced workers surveyed in January of 2002 (the most recent survey) had found jobs that paid at least as well as their previous job.

The manufacturing sector was hard hit by job loss in the 2001-03 period, accounting for nearly 31.8 percent of all displaced workers even though only 12.5 percent of employees worked in manufacturing at the start of the period. The disproportionate displacement rate among manufacturing workers is not new with this survey. In the 2002 survey, 33.3 percent of displaced workers had been employed in the manufacturing sector. In the most recent survey, only 15.3 percent of displaced manufacturing workers were able to find employment that paid at least as much as their previous job.

By region, the East North Central states (Illinois, Indiana, Michigan, Ohio, and Wisconsin) were hardest hit accounting for 17.4 percent of displaced workers, but just 15.7 percent of the nation's population. The 6.4 percent displacement rate for men was somewhat higher than the 6.1 percent displacement rate for women. Black men had an 8.3 percent displacement rate, with black women having a 7.4 percent rate.

By age group, workers age 55 to 64 had the highest displacement rate at 6.9 percent. This is 0.2 percentage points higher than the previous high for this group of 6.7 percent in the 1991 to 1993 period. Workers in this age group also face the greatest difficulty finding new employment. Among the displaced workers surveyed in the years from 1994 to 2002, only 50.3 percent of the men and 39.8 percent of the women between the ages of 55 and 64 were able to find new full-time jobs. Just 13.2 percent of the displaced men in this age group, and 10.7 percent of the women, were able to find jobs that paid at least as much as the ones they lost (see "Job Displacement Over the Business Cycle, 1991-2001" in HTML or PDF format).

Government policies provide limited help for most displaced workers. Only 43.6 percent of displaced workers report having been given advance notification of job loss. A slight majority (51.1 percent) reported receiving unemployment benefits, while 22.1 percent of displaced workers exhausted their benefits.

The data in this survey indicate that displacement rates have been at recession levels in the last three years, and that displaced workers have faced exceptionally bleak prospects subsequently finding new employment. This survey is further evidence that the unemployment rate is not a good measure of the current state of the labor market. The data on the prevalence of displacement and the employment prospects of displaced workers is comparable or worse than the data from the much steeper downturns in the early eighties and nineties.

Dean Baker is the Co-Director of the Center for Economic and Policy Research.